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VENTURE CAPITAL. Brittany SeigneurHarris Rebecca Goudy Laura Nedorezov Jonathan Fox. VENTURE CAPITAL. The History of Venture Capital. Need for funding. Sources of funding. Advantages and disadvatanges. Alternative Pathways. VENTURE CAPITAL. What is Venture Capital?. - PowerPoint PPT Presentation

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VENTURE CAPITALBrittany SeigneurHarrisRebecca GoudyLaura NedorezovJonathan FoxVENTURE CAPITALThe History of Venture Capital

Need for fundingAdvantages and disadvatangesSources of fundingAlternative Pathways2VENTURE CAPITALWhat is Venture Capital?Way to obtain money and experience for a business via the private equity of Venture Capitalists Venture Capitalists: individuals willing to invest in a start upIf money is not obtained through VC, it will have to be obtained from one of the following:Bank Loans, personal savings, or boot legging (Use of companys profits early-on to grow)

VENTURE CAPITALThe history of venture CapitalSome of the first Venture Capitalist include the following:Vanderbilts-RailroadsWhitneys- Thoroughbred horseracingRockefellers-Oil businessWarburgs-physics, arts, pharmacology, physiology, finance, private equity, and philanthropyVC in the first half of the 20th century was the domain of wealthy individuals and familiesThe Small Business Investment Act of 1958 was the first step toward a professionally-managed venture capital industryOfficially allowed for the Small Business Administration (U.S. govt agency) to license private "Small Business Investment Companies Allowed for creation of venture capital firms

4VENTURE CAPITALThe History of Venture CapitalIn 1960s and 1970s, VC firms focused their investment on starting and expanding companiesCompanies were primarily exploiting breakthroughs in electronic, medical, or data-processing technologyIn the 1980s, the industry was hampered by sharply declining returns and certain venture firms began posting losses for the first timeThe market for initial public offerings cooled in the mid-1980s before collapsing after the stock market crash in 1987

5VENTURE CAPITALThe history of venture CapitalThe late 1990s were a boom time for VCBenefited from a surge of interest in the Internet and computer technologiesInitial public offerings of stock for technology and other growth companies were in abundance and venture firms were reaping large returnsIn the 2000s VC funding had spread widely through the medical fieldMany start-ups have become centered around early disease detection and prevention

NASDAQ Composite IndexThe technology-heavy NASDAQ Composite index peaked at 5,048 in March 2000, reflecting the high point of the dot-com bubble (the internet boom)

62010 Investments in Industry In Millions of Dollars

VENTURE CAPITAL[1]7VENTURE CAPITALWhy do you need Venture capital?New companies are often too small and lacking in experience to raise the money needed to produce a new productExamples of Startup Costs:Continuation of R&DEmployee Salaries and BenefitsManufacturing and Production CostsPatent FeesVenture capitalists bring much needed capital to the companies but also bring often needed financial expertise

VENTURE CAPITALWhy Venture Capital over Bank Loan?AvailabilityBanks usually do not offer loans to startups without strict provisions to reduce the riskVenture capital is usually generated from a pool of investors, which reduces the overall risk of the investment

Strict provisions from the bank can greatly limit the ways in which the loaned money is spent.

9SOURCESFriends & FamilyAngelsVenture CapitalGovernment GrantsBanksVENTURE CAPITALCorporate InvestmentPublic InvestorsCustomersSources of capital for a company. Many different options are available, but some may contribute more than others (ex. Knowledge, experience, money, marketing know how).

10 Members of your personal network Have adequate means to make an investmentFriends & Family

Angels

Venture Capital

Corporate

VENTURE CAPITAL Experienced investors using own wealth Professional investment managers Corporations make the investmentBanks

Gov Grants

Public Investors

Customers

VENTURE CAPITAL Commericial/State institutes providing financial services Loans and such May be awarded to companies that meet the size standards established by the Small Business Administration (SBA) General public can invest by buying shares of the company For established companies Customers make direct investment in the R&D of new products or services12Venture Capitalist Invest in companies with potential for high return Raise money and put into funds Funds vary in size Also provide management expertise and often have extensive networks of contactsVC investments are risky; 40% of companies fail, 40% return modest amount of $,

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